There is ‘huge opportunity’ for brokers to tap into commercial lending for small- to medium-sized businesses, industry leaders have said, following news that just a fifth of SMEs use a finance broker.
According to a My Business SME Insight survey, of the respondents from SMEs across Australia, over half (55 per cent) said that they accessed finance from their bank, with 24 per cent using ‘other’ means (such as their own funds ) and just a fifth (20 per cent) saying they used a finance broker.
In fact, less than half (44 per cent) of respondents said that they would use a finance broker for their lending needs.
Although 29 per cent of respondents said they would consider using a broker as an adviser for home loans, and others saying they would consider using a broker for insurance and vehicle and equipment finance (both 23 per cent), just 14 per cent said they would use a broker as an adviser for 'SME lending'.
Likewise, the majority of respondents did not think they would use a broker as an adviser for commercial property, with just 13 per cent saying they would.
Speaking to The Adviser, Stuart Donaldson, founder and owner of financial education business Banyan Co, commented that brokers “should be very encouraged by this survey as it validates the fact there is a huge opportunity to position themselves as trusted advisers”.
He said: “As the primary interface between identifying needs and facilitating solutions with lenders, the broker should be the ‘go to’ person for SMEs. They have a unique position where they are across all the offers in the market and can remove the burden of applying directly to banks for funding needs.
“It is interesting that only 14 per cent of respondents said they would use a broker as an adviser for SME lending. This, if nothing else, highlights the huge opportunity for the industry.
“I believe that in the coming years there will be a very clear and positive shift as the industry, the professional associations, and the specialist media are very actively upskilling, educating, promoting and supporting brokers.”
Touching on the figures, Peter White from the Finance Brokers Association of Australia (FBAA) said that the statistics “were a little disappointing", adding that he also believed that they presented a “huge opportunity” for brokers to upskill.
'The challenge is to make sure brokers are truly equipped to be an adviser'
Speaking to The Adviser, Mr White said: “Commercial lending is the deep end of the pool, you need to do a lot more learning, education and practical application because it becomes very specialised. It isn’t a tick and flick like a home loan. People [may not] like using everyday home loan brokers, because in their head, they don’t believe they'll understand.
“So this is an opportunity for brokers to skill up and prove themselves to be an expert in this area. But, it’s key that brokers ensure they are properly skilled before they go into the deep end of that pool.”
Mr Donaldson agreed, adding: “The survey, in overall terms, suggests there is a ‘step change’ needed if subsequent surveys are to reflect material improvement. This comes down to awareness and action.
“Brokers have the tools, the products, the client base, the confidence and in many cases the skills. They need to drive growth through their business models, be bold in their strategies and look beyond the product (for example, mortgages). It is not about the product, it is all about their client base and what all their needs are. There is always a pathway to servicing a client’s needs even if it is outside the core proposition.
He added: “The industry is well organised, properly structured and growing at a solid pace. The challenge is to make sure brokers are truly equipped to be an adviser and to step well beyond simply facilitating transactions for their clients. The key is continuous education, promoting greater awareness, and maintaining full control of the client.
“Conversely, inaction is leaving the door wide open to leakage and maintaining growth will be difficult in a very crowded and expanding market.”
Find out how you can quickly build your own client base of SME business owners at The Adviser’s latest Bootcamp.
SME finance expert Stuart Donaldson will reveal how you can significantly boost your volumes by tapping into this lucrative sector plus a host of hands-on strategies help you quickly crack this market.
To book your ticket click here.
[Related: Broking ‘a very efficient channel’ for SMEs]